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SYDNEY, Australia -- GIO Holdings Australia Ltd. is advising its shareholders to wait for the formal response from the GIO board of directors later this month before considering AMP Ltd.'s $3.02 billion Australian ($1.80 billion) takeover offer.

Nick Steffey, chief executive officer of GIO, said the offer undervalues the company (BI, Aug. 31).

Sydney-based AMP has issued its Part A statement, which outlines its offer in full. Under Australia's Corporations Law, a company presenting a takeover bid must issue a comprehensive document outlining its reasons for launching the bid and its plans for the target company. The document is forwarded to every shareholder. The target company has two weeks to prepare its response, a Part B statement, and shareholders then have a specified time in which to compare the documents and decide whether to accept the offer. They can, however, accept the offer earlier.

Mr. Steffey said GIO shareholders should wait for GIO's Part B response before making a decision. He said AMP's Part A document was "weighty" and "will certainly take some time to properly review" by the GIO board.

On Sept. 1, stock market volatility forced AMP Ltd. to revise its initial $3.01 billion ($1.79 billion) offer, which was made Aug. 25. AMP increased the bid to $3.02 billion.

If successful, the takeover will make AMP Australia's largest corporate non-life insurer.

Last week, the Australia Competition and Consumer Commission, a regulatory agency, said it would not oppose the bid because AMP's takeover of GIO would not threaten competitiveness in the country's financial services industry.

The revised Sept. 1 offer would ensure GIO shareholders received AMP Ltd. shares worth at least $4.88 Australian ($2.90) for each GIO share. The previous offer had no set minimum value. On Sept. 15, GIO shares closed at $5.01 Australian ($2.98).

AMP Ltd. is Australia's largest life insurer. Its non-life arm, AMP General, is ranked 11th among Australian non-life insurers. AMP Ltd. was floated on the Australian stock market July 14.

GIO shareholders can accept AMP Ltd.'s share offer, take cash or a combination of both.

AMP's CEO, George Trumbull, said AMP adjusted the offer to "provide certainty for GIO shareholders" who wanted to accept the share offer. "In these uncertain times, we felt it was important to give GIO shareholders some comfort, and this certainly does that," he said.

Mr. Steffey said GIO had signed confidentiality agreements regarding "possible transactions" with AMP Ltd., and GIO also had been approached by other potential bidders, which he would not name. He said GIO had not been asked to sign confidentiality agreements with any other potential bidders.

Jonathan Sesel, president of the Australian Institute of Risk Management, said it was too early to determine how a successful take-over would affect risk managers. He predicted that AMP itself could become a takeover target in the next year.

Acquiring GIO would make AMP attractive to a multinational company, Mr. Sesel said. He suggested that a multinational interested in buying the insurer might not necessarily be an insurer. "AMP is as much a prize as GIO," he said.

But Greg Terry, managing director and vice chairman of the Pacific region for Melbourne-based investment bank Credit Suisse First Boston, which is advising AMP in the takeover, said that AMP Ltd.'s corporate articles ensured it could not be a takeover target within five years. When it was floated, the corporate documentation specified that no shareholder could hold more than 5% of AMP shares in that period.

Mr. Sesel said AMP Ltd.'s offer was isolated and did not necessarily indicate further consolidation in the insurance industry.

While there already has been a contraction in the number of insurers in the highly competitive Australian market, Mr. Sesel predicted that would not continue, given worldwide stock market volatility and currency drops in Asia. "I expect very little activity in terms of (consolidation) in the insurance and financial services industries," he said.